FY2017 Preliminary Results Announcement

18 May 2017 Rakon Limited releases its preliminary financial results for FY2017. This release includes 2 supporting attachments: 1. FY2017 Preliminary Results Announcement 2. FY2017 Preliminary Financial Statements Tough trading conditions and restructuring results in loss for Rakon o Net loss after tax of NZ$13.6m vs Net loss after tax of NZ$1.7m in FY2016 o Revenue NZ$94.7 million (FY2016 NZ$112.7 million) o 16% decrease in revenue from Telecommunications major contributor to decrease in total sales volumes and revenue o The result includes non-recurring impacts for impairment of NZ$6.6m and restructure costs of NZ$3.0m o Net debt of NZ$4.5 million reduced from NZ$12.6 million in FY2016 o Increase in positive operating cash flow: FY2017 NZ$9.5 million vs NZ$7.3 million in FY2016 Tough trading conditions and restructuring costs has seen global high technology company Rakon Limited post a net loss after tax of NZ$13.6 million on revenue of NZ$94.7 million for the year ended 31 March 2017. The company's Underlying EBITDA of NZ$4.0 million was in line with forecasts issued earlier in the year. Rakon Managing Director Brent Robinson said the company continued to be affected in its key Telecommunications market segment by reduced demand from equipment makers, as major global network operators had continued to delay infrastructure investment. "While we experienced a lift in business in the Telecommunication market in the final quarter, it was not enough to recover the reduced demand that had negatively affected revenue in the first three quarters" he said. During the year action was taken to address the impact of declined revenue on earnings. The Company had targeted a 20% reduction in operating costs, with an actual reduction of NZ$8.9 million achieved, before the impact of restructure costs of NZ$3.0 million. Mr Robinson said that key priorities during the year have been reducing operating costs and balance sheet risk. The reduction in operating costs and the US$10 million proceeds that resulted from agreements signed with Siward Crystal Technology ("Siward") had allowed the Company to pay down a large portion of its debt. "While the arrangement with Siward provided us an opportunity to improve our balance sheet position, the partnership brings further long term opportunities for both parties. This partnership will give both companies a broader range of products and alternative channels into new and existing markets," he said. In addition to the restructure costs incurred, other non-recurring items had a negative impact on the result. Impairments of NZ$6.6 million were recorded, which included an impairment of goodwill of NZ$1.9 million and an impairment of the investment in Centum Rakon India of NZ$3.2 million, where value-in-use calculations based on future forecasts did not support the full value of this investment being retained. As revenue declined the Company has also increased inventory obsolescence provisions during the year by NZ$4.2 million. Mr Robinson said that Thinxtra had made excellent progress in the year with the deployment of its Low Power Wide Area Network (LPWAN) that was being purpose built for the Internet of Things (IoT). In FY2018 Thinxtra would finalise its network deployment in Australia & New Zealand and move into a revenue generating phase at the end of the financial year where deals for over 1.5 million connections on the Sigfox network had already been signed up. "Although the result for FY2017 is very disappointing, there has been a number of achievements in the year that provide Rakon a stronger position from which improved results can be achieved in the coming year. The Company has lowered its operating cost base and has reduced risk as a result of the debt reduction and the partnership formed with Siward. Engagement with key customers is strong due to interest around new Rakon designs". The Directors confirm that this FY2017 preliminary results announcement is based on audited results. Brent Robinson Chief Executive Officer & Managing Director -ends- Media Enquiries: Louise Howe (Media Liaison) 021 206 0985 www.rakon.com End CA:00301335 For:RAK Type:FLLYR Time:2017-05-18 08:33:36